Bombay High Court
Depe Global Shipping Agencies ... vs Hamilton House on 21 October, 2011
Bench: G. S. Godbole
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ast
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 8355 OF 2011
Depe Global Shipping Agencies Pvt. Ltd. )
a private limited company incorporated )
under the Companies Act, 1956 and having )
its registered office at Hamilton House, )
J.N. Heredia Marg, Ballard Estate, )
Mumbai 400 038. ) ....Petitioner
Vs.
MPIL Corporation Ltd.(formerly known as )
Mather & Platt (India) Ltd.) a private limited
ig )
company incorporated under the Companies )
Act, 1956 and having its registered office at )
Hamilton House, J.N. Heredia Marg, Ballard )
Estate, Mumbai 400 038. ) ....Respondent.
Mr. Haresh Jagtiani, Sr. Advocate a/w Mr. Yashpal Jain, Mr. Suprabh Jain,
Mr. Manish Mirpuri i/b. Haresh Jagtiani & Associates, Advocate for
Petitioner.
Mr. D.D. Madan, Sr. Advocate a/w Mikhail Bahl i/b. Sonal Doshi & Co.,
Advocate for Respondent.
CORAM:- GIRISH GODBOLE, J
DATED:- OCTOBER 21, 2011
ORAL JUDGMENT :
1. Heard Mr. Jagtiani, Sr. Counsel for the Petitioner and Mr. Madan,
Sr. Counsel for Respondent. Rule. By consent Rule made returnable
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forthwith and heard finally.
2. Present Writ Petition filed under Article 226 and 227 of the
Constitution of India challenges the Judgment and Order dated 26/9/2011
passed by the learned Judge of the Court of Small Causes at Mumbai
presiding in C.R. No. 19 thereby dismissing the Application Exh. 26 filed
by the Plaintiff in TE & R Suit No. 198/211 of 2003. Brief background
of the facts leading to this litigation is essential.
3. It is not in dispute that the Petitioner Plaintiff is the landlord and
Respondent Defendant is tenant in respect of the suit premises. The
Maharashtra Rent Control Act, 1999 has been brought into force w.e.f.
30/3/2000. Section 3(1)(b) of the said Act provides that provisions of that
Act will not apply to a limited company having a paid up share capital of
Rs. One Crore or more. In so far as Mumbai is concerned, the jurisdiction
to try and entertain the suit between the landlord and tenant in case where
relationship is controlled by Maharashtra Rent Control Act, 1999 or not is
conferred on the Court of Small Causes established under the Presidency
Small Cause Courts Act, 1882. Section 41 of the said Act reads thus :
"41. (l) Notwithstanding anything contained elsewhere in this
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Act 4[****]but subject to the .provisions of sub-section (2), the.
Court of Small Causes shall have jurisdiction to entertain and try
all Suits and proceedings between a licensor and licensee, or a
landlord and tenant, relating to the recovery of possession of any
immovable property situated in Greater Bombay, or relating to
the recovery of the licence fee or charges or rent therefor,
irrespective of the value of the subject matter of such suits or
proceedings.
(2) Nothing contained in sub-section (l) shall apply to suits or
proceedings for the recovery of possession of any immovable
property, or of licence fee or charges or rent thereof, to which the
provisions of the Bombay Rents, Hotel and Lodging House Rates
Control Act, 1947, the Bombay Government Premises (Eviction)
Act, 1955, the Bombay Municipal Corporation Act [the
Maharashtra Housing and Area Development Act, 1976 or
II of any other law for the time being in force, apply.]"
4. In this case it is not in dispute that as on 30/3/2000, share capital of
Respondent Company was more than Rs. One Crore. It is also not in
dispute that the Respondent Defendant thereafter filed Company Petition
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No. 381 of 2000 for accepting scheme of compromise and arrangement in
which an order was passed by the learned Single Judge of the Company
Court of this Court exercising powers under Companies Act, 1956 on
18/4/2001 and by that order, it was inter alia provided that the share
capital of the Respondent Company will stand reduced to Rs. 75 Lakhs
with retrospective effect w.e.f. 1/4/1999.
5. On this background, the Petitioner filed TE & R Suit No. 198/211
of 2003 on 18/7/2003 for eviction of the Respondent on the ground that
the Respondent was not protected by the provisions of 1999 Act and
hence, the Suit was filed expressly under Section 41 of the 1882 Act.
6. The Respondent filed its Written Statement on 20/10/2003 and in
paragraph-10 of the Written Statement it is inter alia contended thus :
"10. With reference to paragraphs 7 of the plaint, Defendants
deny that their paid up share capital on 31st March 2000 was more
than Rupees One Crore. Defendants submit on 31st March 2000
their paid up share capital was Rs. 75,60,000/-. Defendants crave
leave to refer to and rely on order dated 18th April 2001 passed by
the Hon'ble High Court of Judicature and certificate issued by the
ROC, Bombay in Company Petition No. 381 of 2000. Defendants
deny that provisions of Maharashtra Rent Control Act are not
applicable to Defendants. Defendants deny that they are not
entitled to claim protection under the Maharashtra Rent Control
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Act, 1999. Defendants deny that they are liable to hand over
vacant possession of the suit premises to Plaintiffs."
7. At this stage the Petitioner filed an application for amendment of
the plaint which was numbered as interim Notice No. 222 of 2006 and
sought to incorporate averments to the effect that the aforesaid Judgment
and Order dated 18/4/2001 passed by the Company Judge had been
fraudulently obtained by the Defendant Company solely with a view to
bring itself under the protective umbrella of the provisions of the 1999
Act. This Application was opposed by the Respondent. By Judgment and
Order dated 2/11/2006, the learned Judge of the Trial Court allowed the
Application for amendment. It is necessary to note that while opposing
the said Application for amendment, the principal contention of the
Respondent Company was to the effect that the Small Causes Court does
not have any jurisdiction to go into the aspect whether the Order passed
by the High Court had been fraudulently obtained by the Respondent or
not and on that basis the Application for amendment was opposed. While
allowing the said Application on 2/11/2006, the learned Judge of the Trial
Court has noticed that whether the contentions or facts which are being
raised by way of proposed amendment are within the jurisdictional ambit
of that Court or not can be considered at the stage of hearing. It is also
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necessary to note at this stage that even prior to filing of this Application
the Trial Court had framed issues and as many as 9 issues had been
framed on 15/3/2004. It is necessary to bear in mind that the Application
for amendment was subsequently filed and allowed and, therefore,
obviously the issues as framed earlier did not cover the controversy which
was sought to be raised by the amendment application bearing Interim
Notice No. 222 of 2006.
8.
The order allowing the amendment was challenged by the
Respondent Defendant by filing Writ Petition No. 213 of 2007. That Writ
Petition was heard and decided by learned Single Judge (B.R. Gavai, J) by
Judgment and Order dated 4/5/2011. It is necessary to note paragraphs 3,
4 and 6 of the said Judgment which read thus :
"3. Shri Bharucha, learned Senior Counsel submits that
the amendment, which is allowed, permits the plaintiff to raise a
ground which is beyond the jurisdiction of the learned Small
Causes Court. He submits, that in effect, the plaintiff by way of am
endment has sought to challenge the order passed by this Court
in a Company Petition which cannot be gone into by the learned
Small Causes Court. He further submits, that the amendment ought
not to have been allowed by the learned Trial Court.
4. Shri Jagtiani, learned Senior Counsel on behalf
of respondent - plaintiff on the contrary submits, that the
amendment only seeks to incorporate the averment that the
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order which was obtained by the defendant in a Company Petition,
was obtained fraudulently behind the back of the plaintiff and
as such the said order is not binding on the plaintiff.
6. The learned Trial Court, upon considering the rival
submissions has found that the amendment which is
sought to be incorporated was with respect to the fact
which was came to the notice of the plaintiff subsequent to filing
of the plaint. The learned Trial Court has also found
that the amendment which is sought to be incorporated
cannot be said to be unconcerned with the controversy
between the parties. In so far as the contention of the
petitioner regarding the suit being beyond the jurisdiction of the
learned Small Causes Court is concerned, the learned
Trial Court has rightly found that the defendant-petitioner
would have a liberty to file an additional written statement
to meet the pleadings of the plaintiff and if the pleadings
regarding the jurisdiction are raised by the petitioner--
defendant, the same would be considered at the stage of the hearing
of the suit. "
9. Thereafter the Respondent Plaintiff filed a Review Petition and it is
necessary to note ground No. (C) in the Review Petition which reads
thus :
"(C) That the Hon'ble Bombay Presidency Small Causes Court
erred in not appreciating that the present Respondents had not
taken any objection to the Scheme and therefore could not do so
now by introducing the proposed amendments."
It was sought to be contended that the proposed amendment was barred by
limitation and even in the original plaint case of unlawful reduction of
share capital has been pleaded. Even this Review Petition was dismissed
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by learned Single Judge (B.R. Gavai, J) by order dated 25/5/2011. After
dismissal of the Review Petition, the Respndent filed its additional
Written Statement on 2/8/2011. Additional Written Statement clearly
shows that the Defendant has dealt with all the averments in the plaint
which were incorporated by the amendment and raised all possible
defences in respect of the amended plaint. In paragraph 7 of the Written
Statement there is a specific ground that the defendant did not have any
intention to defraud the Plaintiff and it was also denied that with such
malafide intention share capital of the Defendant had been shifted to
another company.
10. At this stage the Petitioner Plaintiff filed an application for
recasting the issues in September, 2011 and prayed that in view of the
substantial amendment in the plaint and in view of the fact that the
additional Written Statement had been filed, it was necessary to frame 2
additional issues.
11. This Application was opposed by the Respondent on the ground that
in the Written Statement the jurisdiction of the Court of Small Causes to
go into the validity or otherwise of reduction of share capital of Defendant
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had already been challenged and if the Plaintiff is aggreived by the
reduction, the only remedy available to the Plaintiff is to challenge the
Order of the Company Court before appropriate Appellate Authority.
12. Learned Judge of the Court of Small Causes thereafter passed the
impugned order which is noted herein above. The gist of the reasons of
the Learned Judge can be found in paragraph-6 of the Trial Court
Judgment which reads thus :
"6. On perusal of the provisions of Section 42, 43 and 44, it
appears that the said provisions are pertaining to the relevancy of
the Judgment and decree in the proceeding. The suit is for
possession of suit property under the PSCC Act and the scope of the
inquiry is limited. There is a substance in the argument advanced
by the Ld. Counsel for the defendants that the said order pertaining
to reduction of capital was given by the Hon'ble High Court after
following the procedure and the defendants cannot challenge the
said order before this Court by raising the contention that the said
order is obtained by the plaintiffs fraudulently. There is no doubt if
any order or decree is obtained by fraud, that cannot be challenged
before this Court. Therefore, there is no need to frame the
additional issues as suggested by the Plaintiffs. If the Plaintiffs are
aggrieved by the order of Hon'ble High Court reducing the capital
of the defendants, the plaintiffs may approach the proper coram and
challenge the legality and validity of the said order, but in the
instant case, the suit is for possession under the PSCC Act and the
plaintiffs want to evict the defendants alleging that the defendants
are not protected under the Act. Thus, I pass the following order.
ORDER
The application is rejected."
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It is obvious that there are some typographical errors in the Judgment as
originally passed and at one place instead of the word "plaintiffs" word
"defendants" has been written and vice versa at the other place. This is
the order which is impugned in this Writ Petition.
13. Mr. Jagtiani, Learned Sr. Counsel appearing for the Petitioner
submitted that since the amendment of plaint was allowed and since an
additional Written Statement was filed, an issue of fact as also an issue of
law has arisen and since the amendments were made after the framing of
the issues, the Trial Court committed not only an error apparent on the
face of the record but the Trial Court has also clearly failed to exercise the
jurisdiction vested in it by law. He submitted that even this failure of the
Trial Court which is also an error apparent on the face of record will not
only result in delay leading to causing a lot of injustice and prejudice to
the Petitioner but would also lead to unnecessary and avoidable
multiplicity of judicial proceedings in as much as in the absence of an
issue, the evidence on that point may not be permitted to be led even
though the pleadings are allowed to be brought in by the amendment of
the plaint and additional written statement. He further submitted that
interference of this Court was warranted in as much as no prejudice
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would be caused to the Respondent and only on account of framing of an
additional issue, it did not mean that the Court was bound to exercise
jurisdiction in respect of the issues which were framed and that aspect
will have to be determined at the time of Trial of the suit.
14. Mr. Jagtiani relied upon unreported Judgment of the Learned Single
Judge (Dr. D.Y. Chandrachood, J) dated 27/1/2004 in Writ Petition No. 93
of 2003 and pointed out that if the Plaintiff in a Civil Suit raises a
specific contention regarding fraudulently obtaining an order from the
Company Judge under Section 391 of the Companies Act, 1956, such a
fact becomes a relevant fact under Section 44 of the Indian Evidence Act,
1872.
15. On the other hand Mr. Madan, learned Sr. Counsel opposed the Writ
Petition vehemently by raising 4 grounds by advancing following
submissions :
(a) At the outset it was submitted that the Writ Petition is not
maintainable since it was filed against an interlocutory order. Reliance
was placed on paragraph- 113 (3) of the Judgment of the Supreme Court
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in the case of Shah Babulal Khimji v/s. Jayaben, AIR 1981 S.C. 17861.
(b) Reliance was also placed on the Judgment of Justice Hidayatullah
of Bench of 5 Judges reported in AIR 1953 Nagpur 89 in the case of
Bhailal Jagadish v/s. Additional Deputy Commissioner, Akola & anr2.
and particularly on the observations in paragraphs - 7 to 11 of the said
Judgment and based on that it was submitted that the power of
Superintendence conferred on the High Court is a power merely to correct
the errors of the jurisdiction and it does not confer any power on High
Court to hear Appeals where such Appeals do not lie nor does it give
power to substitute a decision, which the High Court thinks is correct, in
place of the decision of the inferior court or tribunal.
(c) Reliance was also placed on the Judgment of the Division Bench
in the case of Batuk K. Vyas v/s. Surat Borough Municipality and ors.
AIR 1953 Bombay 1333 and particularly the observations in paragraph-8
to the effect that even if the Judge has committed an error, if the error is
committed within confinement of the jurisdiction conferred on the Judge,
the High Court cannot interfere. He submitted that the only remedy
1 AIR 1981 S.C. 1786
2 AIR 1953 Nagpur 89
3 AIR 1953 Bombay 133
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available to the Petitioner is to challenge the order in appeal which may
be required to be filed in case the Judgment is delivered against the
Petitioner and even if the Judgment is delivered in favour of the Petitioner
but the finding on the particular controversy is against the Petitioner, the
Petitioner can always raise challenge under Order 41 Rule 22 or Rule 33
of the Code of Civil Procedure, 1908; therefore, the Petitioner has an
alternative and efficacious remedy which is a good ground for refusing to
exercise the extraordinary jurisdiction under the Constitution of India. It
was alternatively submitted that the issues as framed are sufficient and
Issue Nos. 1 and 2 already cover entire controversy including the
controversy arising out the amendment of the pleadings; and since issues
are sufficient, no interference is warranted and at the highest refusal to
frame issue would only be an error within the jurisdiction conferred on the
Trial Court.
(d) It was lastly submitted that Section 44 of the Indian Evidence Act,
1872 has no application and the Judgment of the learned Single Judge (Dr.
D.Y. Chandrachood, J) was sought to be distinguished by pointing out that
the learned Single Judge has not considered the fact that Sections 40, 41,
42 and 44 are attracted only in case where the Judgment is otherwise
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relevant under Sections 40 to 42.
16. I have carefully considered the rival submissions. In my considered
opinion, the learned Judge of the Trial Court has committed an error
apparent on the face of the record and if this error, which is apparent, is
not corrected at an early stage of litigation, it may result in unnecessarily
delaying the trial of the proceeding at subsequent stage.
17.
I have already noted Section 3(1)(b) of the 1999 Act. The said
Section carves out an exception against the limited company having share
capital of Rs. One Crore and more. The moment limited company's
share capital is reduced below Rs. One Crore, it gets protection of the
Maharashtra Rent Control Act, 1999 and if the share capital rises above
Rs. One Crore the protection is lost. The Suit is filed under Section 41 of
the 1882 Act on the ground that the protection of the Maharashtra Rent
Control Act, 1999 is not available to the Respondent/Defendant. This is
an averment which has been made in the plaint so as to show the Court
that the Court can exercise jurisdiction vested in it under Section 41(1) of
the 1882 Act and that the case in hand is not one governed by the
exceptions carved out in sub-section 2 of Section 41 of the 1882 Act.
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18. In the earlier round of litigation, the Petitioner had been allowed to
amend the plaint, and, precisely on the ground on which the present
Application for recasting issues is opposed, the Application for
amendment had also been opposed. That application was allowed and the
challenge to that order has failed before this Court. Paragraph-6 of the
Order of the learned Single Judge (B.R. Gavai, J) clearly shows that one
of the contentions which was advanced before this Court was to the effect
that such a plea regarding the fraudulent reduction of share capital by
using the machinery of the Company Court in proceedings under the
Indian Companies Act, 1956 can never be raised before the Court of Small
Causes. This argument has been rejected. Once elaborate pleadings are
allowed to be brought in by the amendment of plaint and additional
Written Statement, then, obviously the parties are at issues and such issues
had to be framed..
19. Order 14 of the Code of Civil Procedure, 1908 provides that issues
are raised when a material proposition of fact or law is affirmed by one
party and denied by the other. Rule 1(2) provides that material
propositions are those propositions of law or fact which a plaintiff must
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allege in order to show a right to sue or a defendant must allege in order to
constitute his defence. Sub-rule 3 provides that each material proposition
affirmed by one party and denied by the other shall form the subject of a
distinct issue. The issues are of 2 kinds. (i) issues of fact and (ii) issues
of law. In the present case there is an assertion of material proposition of
fact to the effect that according to the Petitioner/Plaintiff, the
Respondent/-Defendant had fraudulently procured an order in proceedings
under the Indian Companies Act, 1956 for reducing share capital to Rs. 75
Lakhs solely with a view to get protection under the umbrella of the
Maharashtra Rent Control Act, 1999. This material proposition of fact has
been denied by the Respondent. The amended plaint also raises the
material proposition of law in as much as one of the question which would
would arise in such situation is : when the 1999 Act came into force on
30th March, 2000, the share capital of the Respondent was admittedly
more than Rs. One Crore and, thereafter, but before the filing of the Suit
the same has been reduced with retrospective effect to Rs. 75 Lakhs w.e.f.
1/4/1999. The legal effect of such a reduction has to be considered by the
Trial Court and therefore even this material proposition of law gives rise
to an issue of law which also arises.
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20. It is not necessary that the material proposition of fact must be
essentially referable to a relevant fact as contemplated by the Indian
Evidence Act, 1872. However, in my opinion, this is a case where section
40 and 44 are clearly applicable. Sections 40, 42 , 43 and 44 read thus:
40. Previous judgments relevant to bar a second suit or trial.-
The existence of any judgment, order or decree which by law
prevents any Court from taking cognizance of a suit or holding a
trial, is a relevant fact when the question is whether such Court
ought to take cognizance of such suit or to hold such trial.
42. Relevancy and effect of judgments, orders or decrees,
other than those mentioned in section 41.-Judgments, orders or
decrees other than those mentioned in section 41 are relevant if they
relate to matters of a public nature relevant to the enquiry; but such
judgments, orders or decrees are not conclusive proof of that which
they state.
43. Judgments, etc., other than those mentioned in sections 40
to 42, when relevant.-Judgments, orders or decrees, other than
those mentioned in sections 40, 41 and 42, are irrelevant, unless the
existence of such judgment, order or decree is a fact in issue, or is
relevant under some other provision of this Act.
44. Fraud or collusion in obtaining judgment, or
incompetency of Court, may be proved.-Any party to a suit or
other proceeding may show that any judgment, order or decree
which is relevant under section 40, 41 or 42, and which has been
proved by the adverse party, was delivered by a Court not
competent to deliver it, or was obtained by fraud or collusion. "
In the present case issue No. 1 as already framed is about
jurisdiction of the Court. According to me, whether the
Respondent/Defendant enjoys the protection of the 1999 Act or whether it
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does not enjoy the protection of 1999 Act is the matter which has to be
decided by the Court of Small Causes, but in either cases it is the Court of
Small Causes alone which has jurisdiction to try such a suit since it is a
suit between landlord and tenant relating to recovery of possession of the
tenanted premises. In view of this issue of jurisdiction will have to be
essentially read and considered as an issue about maintainability of suit
and not as a issue jurisdiction since it is not the case of the Defendants
that the Court of Small Causes does not have the territorial or pecuniary
or subject jurisdiction. The defence is essentially about maintainability of
the suit under Section 41 of the 1882 Act by raising a contention that the
Defendant Company is covered under Section 3 (1) (b) of the 1999 Act.
In the back drop of the above, in my opinion, Section 40 of the Indian
Evidence Act, 1872 will certainly make the disputed question of fact
about fraudulently obtaining the order from the Company Court a
relevant fact. The existence of the Judgment of the Company Court is not
in dispute, but it is contended (as seen in paragraph-10 of the Written
Statement originally filed) that on account of the said Judgment the Small
Causes Court will have to presume that the share capital of the Defendant
company is less than Rs. One Crore, and, therefore Small Causes Court
does not have jurisdiction to entertain the suit which is filed under the
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provisions of Section 41 of the 1882 Act on the ground that the suit
premises fall within the exceptions carved out by the sub-section 2 of the
said Section. Thus, defence which is raised is a relevant fact both for the
purpose of deciding whether the order of the Company Judge prevents the
Court of Small Causes from taking cognizance of the suit or hold trial and
the question is whether the Small Causes Court can take cognizance of the
suit or hold trial with the pleadings as they have been permitted to be
incorporated. If the amendment to the plaint had not been allowed it could
have probably been argued by the Respondent that section 40 does not
apply. Even this is a doubtful proposition since in paragraph-10 of the
Written Statement as originally filed, the Defendant had already raised the
contention that would ultimately make the said issue a relevant fact in
issue under section 40. However, after the amendment, the only
conclusion which has to be drawn is that the case is governed by Section
40.
21. In any case, since fraud has been alleged while procuring the
Judgment of the Company Court. Whether fraud is actually played or not
is not a matter to be decided at this stage, and in my opinion it was
necessary to frame issues which cover the amended pleadings.
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22. Though Mr. Madan has contended that the Writ Petition is not
maintainable and the only remedy is to challenge the order in an Appeal
against final Judgment, nature of the impugned order is such that it is not
an interlocutory order. It is an order which determines conclusively,
atleast at the stage of the trial of the Suit before the Trial Court, the
question regarding whether an issue should be framed or not. The
Supreme Court in the case of Shah Babulal Khimji(supra) has considered
the question as to what is an intermediary and/or interlocutory Judgment.
Though Mr. Madan has relied upon the observations in paragraphs- 113
and 114, in my opinion, the conclusions recorded in the paragraph- 115 of
the said Judgment are more to the point and applicable to the facts of this
case. Judgment refusing to frame issue which arises on the pleadings is a
Judgment which decides the matters of moment and certainly affects vital
rights of the Petitioner/Plaintiff to lead evidence in support of its claim. In
the absence of such an issue an objection is bound to be raised for leading
evidence. The Trial Court would be called upon to determine such
objection during the process of trial. Arguments will be advanced and an
order will be invited. All this is bound to delay the trial of the Suit. The
Suit is filed in the year 2003 and is still pending after 8 years. The
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legislative intent behind amending the Code exhaustively in the year
2002 is to ensure that the trials are conducted expeditiously and even
while exercising jurisdiction under the Constitution of India this Court
cannot overlook such legislative intent. For the same reason, though there
is no dispute about proposition of law laid down by the Judgment of the 5
Judges Bench of the Nagpur High Court in the case of Bhailal
Jagadish(supra) or the Division Bench of this Court in the case of Batuk
Vyas(supra), ratio of both the Judgments is not applicable to the facts of
this case. On the other hand, in a situation which is more akin to the
controversy in dispute, the Judgment of the learned Single Judge (Dr. D.Y.
Chandrachood, J) lays down the proposition of law and a binding
precedence which directly covers the controversy. The criticism of the
said Judgment advanced by learned Senior Counsel Mr. Madan to the
effect that Justice Dr. D.Y. Chandrachood has not considered Sections 40
to 43 of the 1872 Act, is also not correct and mere reading of that
Judgment shows that the learned Judge has considered said sections.
Paragraph-7 of the said Judgment of the Learned Single Judge to the
extent it is relevant reads thus :
"7. However there is one aspect of the matter in which, to my
mind, the intervention of this Court is necessary at the present stage
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in order to prevent a manifest failure of justice. Under Section 44
of the Evidence Act, 1872 any party to a suit or other proceeding is
entitled to show that any judgment, order or decree which is
relevant under Sections 40, 41 and 42 of the Act and which has
been proved by the adverse party was delivered by a Court not
competent to deliver it, or was obtained by fraud or collusion. The
specific defence of the Petitioner is that the order passed by the
High Court in proceedings under Section 391 of the Companies
Act, 1956 was obtained by fraud. Counsel appearing on behalf of
the Petitioner submitted that on 31st March 2000 when the Rent
Control Act came into force in the State, the share capital of the
Respondent was admittedly in excess of Rs. 1 crore. The
Respondent was not a protected tenant upon the enforcement of the
Act. The order of the Calcutta High Court was passed on 10th May
2000. ..........................Counsel for the Petitioner has relied upon
the judgment of the Supreme Court in Gram Panchayatr of Village
Naulakha v. Ujagar Singh AIR 2000 SC 3272, in which it has been
held, accepting the view of the Allahabad, Calcutta, Patna and
Bombay High Courts, that there is no necessity to file an
independent suit for a declaration that a judgment, decree or order
which has been previously obtained and which is relevant under
Sections 40, 41 and 42 was obtained by fraud or collusion. The
Supreme Court held that no independent suit as a condition
precedent is necessary. At this stage, it is neither appropriate nor
proper for the Court to comment upon the merits of the contention
of the Petitioner. However, in my view, having regard to the
provisions of Section 44 of the Evidence Act, it would be necessary
that the Petitioner be furnished an opportunity of leading evidence
in rebuttal. The Respondent has in the course of the deposition of
its witness set up the order of the Calcutta High Court as a ground
for urging that the protection under the Rent Act has not been lost.
The Petitioner has, therefore, had no opportunity as of date to set
up its plea of fraud because a reference to the order of the Calcutta
High Court came for the first time on 26th December 2001 after the
Examination-in-Chief of the Petitioner was concluded."
23. In present case also the dispute is regarding reduction in the share
capital and, hence, this Judgment is binding precedent directly applicable
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to the facts of the present case though that Petition arose out of a dispute
regarding permission to argue question during the course of oral evidence.
In my considered opinion, the error which has been committed by the
Learned Judge of the Trial Court is not an error within jurisdiction but the
learned Judge of the Trial Court has failed to exercise jurisdiction
expressly conferred on him by law and if this error is not corrected, it will
result in a manifest failure of justice. The Learned Judge has clearly
committed an error apparent on the face of record. Hence a case for
interference under article 227 of the Constitution of India is made out.
Accepting Mr. Madan's argument that the only remedy available to the
Petitioner is to challenge the correctness of the order in Appeal or
subsequent proceedings would clearly amount to turning Nelson's Eye to
a manifest error of jurisdiction and failure to exercise jurisdiction which
cannot be done. The impugned Judgment and Order clearly overlooks not
only the provisions of Order 14 of the Code, Section 41 of the 1882 Act,
the frame of the suit and the nature of the controversy, the amended
pleadings and the provisions of sections 40 and 44 of the 1872 Act but
also completely overlooks the ground on which the earlier Writ Petition
being Writ Petition No. 213 of 2007 has been filed and the Judgment of
the learned Single Judge (B.R. Gavai, J) dismissing the said Writ Petition.
24 908.wp8355.01
Hence this is a fit case for exercising jurisdiction as I have reached a
conclusion that the learned Judge has taken a view which was impossible
to take and in case where issues of both of fact and law clearly arises a
refusal to frame such issues is a clear case of refusal to exercise
jurisdiction and refusal to perform the statutory obligations cast upon the
learned Judge of the Trial Court. The High Court, under Article 227 of the
Constitution of India has the jurisdiction to ensure that all subordinate
Courts act in accordance with well established principles of law and is
vested with power of superintendence even in matters where no appeal or
revision lies to High Court. Hence the Petition deserves to be allowed.
24. Before parting with this Judgment it is also necessary to note that,
based on the date of commencement of the 1999 Act, the date of filing
Company Petition for accepting scheme for compromise and
arrangement, the date of the order allowing the said Petition on 18/4/2011
with retrospective effect on 1/4/1999 an issue of law also arises as to
whether a company which is not governed by the provisions of Section
3(1)(b) of the Maharashtra Rent Control Act, 1999 at the commencement
of the said Act as on 31/3/2000 can cease to be governed by the said
Section and claim protection of the said Act on account of subsequent
25 908.wp8355.01
reduction in the share capital prior to the filing of the Suit. Apart from
this additional issue No. 2 as suggested by the Petitioner also needs to be
recast. Mr. Madan alternatively submitted without prejudice to his first
contention that none of the two additional issues arise from his pleadings,
the issue cannot be framed so as to cast burden on the Defendant. Mr.
Madan is justified in pointing out that the issue purported to place burden
on the Respondent/Defendant rather than placing the burden on the
Petitioner/Plaintiff.
25. Hence I pass the following order :
(a) The impugned Judgment and Order dated 26/9/2011 is
quashed and set aside. Apart from the additional issue No.1 as suggested
by the Petitioner, two more issues will have to be framed by the Trial
Court. Additional issue No. 2 as suggested by the Petitioner will have to
be slightly modified by placing burden on the Plaintiff and issue of law as
indicated above in addition to the additional 2 issues will also have to be
framed.
(b) The Additional issues will read thus :
(i) Does the plaintiff prove that the defendant has fraudulently
26 908.wp8355.01
obtained the order dated 18th April 2001 reducing the paid up capital
of the defendant ?
(ii)Does the Plaintiff prove that the order dated 18th April, 2001 is not
binding on the plaintiff ?
(iii)Whether a Company which is not enjoying the protection of the
Maharashtra Rent Control Act, 1999 as on 31/3/2000 being the date
of commencement of the Act can subsequently get protection on
account of reduction of its share capital below Rs. 1 Crore and
whether Section 3(1)(b) of the said Act ceases to apply on account
of such reduction ?
(c) Rule made absolute in the aforesaid terms with no order as to
costs.
26. At this stage, Mr. Madan prays for staying this order for a period of
6 weeks to enable the Respondent to challenge this order. Order shall
remain stayed for a period of 6 weeks.
(GIRISH GODBOLE, J)
